Gold output rebounds after Govt intervention

Gold deliveries by small-scale miners to Fidelity Gold Refinery have rebounded to January 2024 levels after the reversal of a 15 percent value-added tax (VAT) on gold deliveries. In the second quarter of 2024, small-scale miners delivered 4.52 tonnes of gold, a 55.59 percent increase from the 2.9 tonnes in the first quarter. This surge is attributed to the removal of the VAT levy, which was scrapped through Statutory Instrument (SI) 105 of 2024.

The VAT had previously caused significant cash flow issues for small-scale miners, leading to reduced deliveries in February and March and encouraging side marketing of gold. With the tax removal, deliveries have started to recover, with 3.3 tonnes delivered cumulatively in May and June.

Economist Dr. Prosper Chitambara and CoMZ chief executive officer Mr. Isaac Kwesu both highlighted the positive impact of the tax reversal on miners' operations and cash flow, predicting continued recovery in gold deliveries. Overall, gold deliveries for the second quarter of 2024 surged to 7.74 tonnes, marking a 28 percent increase from the first quarter. Small-scale miners accounted for about 61.4 percent of total gold deliveries, returning to their annual average delivery rate.

Gold deliveries in the first six months of 2024 reached 13.78 tonnes, slightly lower than the same period in 2023 and significantly below the record-breaking 15.97 tonnes in 2022. Despite the challenges, the Government maintains a gold delivery target of 40 tonnes for 2024, higher than the 35.1 tonnes delivered in 2022.

Economist Mr. Tinevimbo Shava emphasized that removing the VAT on gold deliveries supports small-scale miners and stabilizes the gold supply chain, leading to increased deliveries to Fidelity Gold Refinery. The positive impact of this policy change is expected to continue as more miners resume deliveries to the formal market.